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This paper was written and published thanks to the kind nancial support of Saferworld, a British non-governmental organisation.
Contents
1. Introduction ..............................................................................................................................................
Purpose of the Paper ..................................................................................................................................
Denitions .................................................................................................................................................
Sources ......................................................................................................................................................
Measuring and Evaluating Corruption ........................................................................................................
Scope of the Issue .......................................................................................................................................
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1. Introduction
Denitions
The Czech legal system does not have a proper denition of corruption. In the text, the author uses the term as
dened in various corruption related documents of the Czech government, which dene corruption as the abuse of a
person's oce and violation of the impartiality principle in decision-making, motivated by a desire of prot. Corruption is a mistake in
the decision-making (governing) process. The elements of corruption relationship are the decision-maker; the decision-maker's power to
deviate from prescribed rules; making such a deviated decision in exchange for a certain benet; and the wrongfulness and immorality
of such an exchange. The capability of institutions to subdue and combat corruption indicates the quality of such institutions and of
the institutional system as such.6
1
2
3
4
5
Resolution of the Government of the Czech Republic No. 125 of 17 February 1999 Governmental Program of Combating
Corruption.
Criminal Law Convention on Corruption CETS No.: 173.
Convention on the Fight Against Corruption Involving Ocials of the European Communities or Ocials of Member States of
the European Union, EC Action Plan to Combat Organized Crime, Council Resolution on the Prevention of Organized Crime
with Reference to the Establishment of a Comprehensive Strategy for Combating It.
OECD Convention on Combating Bribery of Foreign Public Ocials in International Business Transactions.
UN Convention Against Transnational Organized Crime, UN Convention Against Corruption, UN Declaration Against
Corruption and Bribery.
Resolution of the Government of the Czech Republic No. 473 of 19 May 2003 concerning the Report on Corruption in the
Czech Republic and on Meeting the Schedule of Measures adopted under the National Program for Combating Corruption
(hereinafter The Report on Corruption in the Czech Republic).
Introduction | 3
In this paper, the term foreign arms trade covers both exports and imports of military materials as dened by law,7
but also exports and imports of so-called sporting arms and hunting weapons as dened by other legal instruments8.
Arms trading in the Czech Republic refers to business activities as dened by relevant legal regulations.9
Sources
This study is based on open government sources related to corruption and national security; interviews of the author of
this paper with numerous public ocials; reports of foreign NGOs, especially Saferworld and Human Rights Watch;
and other public sources, especially media news. The author realizes that information drawn from the above sources
could not have been further veried. The sources served primarily to make general conclusions and recommendations
for improvement, not to prove or comment on various negative examples. In both its methodology and contents, this
paper builds on a research produced by the British branch of Transparency International on corruption in ocial arms
trading.10
10
Act No. 38/1994 Coll., on foreign trade with military material and on the amendment of Act No. 455/1991 Coll., on trade
licensing (Trade Act), as amended, and on the amendment of Act 140/1961 Coll., Criminal Code, as amended, hereinafter
referred to as the Act on Foreign Trade with Military Material.
Act No. 62/2000 Coll., on some measures concerning exports and imports of products and on licensing proceedings and on
the amendment of some acts and related Government Regulation No. 185/2000 Coll. which lays down the products which may
be imported into or exported from the Czech Republic only based on the license pursuant to Act 60/2000 Coll., and on some
measures concerning the export and import of products and on license proceedings and on amendments of some acts.
Act No. 119/2002 Coll., on re-arms and ammunition and on the amendment of Act No. 156/2000 Coll., on verication of rearms, ammunition and pyrotechnical objects and on the amendment of Act No. 288/1995 Coll., on re-arms and ammunition
(Fire-Arms Act), as amended by Act No. 13/1998 Coll., and Act 368/1992 Coll., on administrative fees, as amended, and of Act
455/1991 Coll. on trade licensing (Trade Act), as amended, hereinafter referred to as Fire-Arms Act; Act 156/2000 Coll., on
verication of re-arms, ammunition and pyrotechnical objects and on the amendment of Act 288/1955 Coll., on re-arms and
ammunition (Fire-Arms Act), as amended by Act 13/1998 Coll. and Act 368/1992 Coll., on administrative fees, as amended.
Catherine Courtney: Corruption in the Ocial Arms Trade. Policy Research Paper 001, Transparency International UK, edited
by: Laurence Cockcroft and David Murray.
4 | Introduction
Therefore, the more frequent method to describe and evaluate the scope and mode of corruption is describing
perception of corruption or corruption tendencies in a particular country or institution. Some social scientists identify
the following four main approaches:11
1) Research based on expert opinions
This approach has been used by the authors of the International Country Risk Guide (ICRG), a study issued annually
since 1982 by an organisation called Political Risk Services. Based on the opinions of well-informed experts, it
publicizes an ICRG Corruption Index, which indicates the inclination of low, middle, and top government ocials
to request and accept bribes.
2) Studies based on surveys in the business community and the wide public
This approach was adopted primarily by the authors of Global Competitiveness Report (GCR) and World
Development Report (WDR), published by the World Bank since 1996.
3) Studies compiling results of other reports
An example serves the annual Corruption Perception Index (CPI), published annually since 1995 by Transparency
International (TI), an international NGO. The CPI is calculated from the weighted average of approximately 17
surveys of various scope and focus. Apart from the CPI, TI has also been publishing the Bribe Payers Index (BPI,
since 1999). BPI ranks exporting countries according to their inclination to bribery. The very recent survey for the
year 2002 ranked 15 developing market economies based on 835 interviews with senior executives of various local
and foreign companies, banks, and accounting and law rms.
4) Studies working with more objective data
An exceptional example of this approach is the so-called Neumann Index, published in 1994. The authors
interviewed numerous German exporters to determine the percentage of business cases which succeed thanks to
bribery.
Even though the above methods dier, their results are very similar. They prove their value in a regression analysis in
which they show similar results. One of their drawbacks, however, in that they measure primarily the perception of
corruption, rather than the objective, precise, and quantitative extent of corruption.
For the purposes of this study, the author, with the exception of the following chapter, did not use any of the
aforementioned methods for his goal was not primarily to estimate the level of corruption or measure its perception
but rather to describe the existing corruption mechanisms in the eld of arms trade in the Czech Republic. The author
tries to identify the risk factors which provoke and support corruption behaviour and focus on mechanisms that may
lower the risk of both current and future corruption.
11
WEI, SJ. Corruption in Economic Transition and Development: Grease or Sand? 2001b. (Preliminary version),
http://www.unece.org/ead/sem/sem2001/papers/Wei.pdf.
Introduction | 5
The risk factors enhancing the danger of corruption are the following: distribution of government subsidies; trading
restrictions; inconsistent and non-transparent decision-making of the public bodies; inecient sanctioning and
monitoring mechanisms designed to combat corruption; lack of public and parliamentary control; and the conict of
interests.
6 | Introduction
Import (CZK)
Export (CZK)
2003
1,221,943,000
2,208,868,000
2002
559,797,000
2,425,313,000
2001
375,271,000
2,534,947,000
2000
387,489,000
2,685,771,000
The ocial data provided of the Ministry of Industry and Trade show that the total volume of military materials
exported in 2003 was 82.9 million (approximately CZK 2.69 billion); the total volume of civilian rearms and
ammunition exported was 87.4 million (approx. CZK 2.85 billion); the total volume of armaments imported was
120.4 million (approx. CZK 3.92 billion), and the total volume of civilian rearms and ammunition imported was
14.4 million (approx. CZK 469 million).16
The above gures show that data in various ocial statistics regarding foreign trade in military materials may vary to a
great extent. This paper, however, does not intend to explain the discrepancies between such statistics. It is up to the
relevant authorities to explain the dierences thus improving the credibility of the data presented.
The most important part of the domestic arms trade are the acquisitions of the Czech military. Exact gures are not
being published in this eld, and the total expenses for the procurement of arms and ammunition may only be roughly
inferred from the Ministry of Defence annual reports, or from reports submitted by the Czech Republic to the UN.
Year 2003
Year 2002
Year 2001
Year 2000
9,950,813,000
9,629,240,000
10,232,260,000
9,866,603,000
530,555,000
398,446,000
396,620,000
282,554,000
148,775,000
244,111,000
167,240,000
1,277,000
42,663,000
44,444,000
38,113,000
13,873,000
In the upcoming years, we may expect a certain increase in the volume of arms procurement for the military, in
connection with the recently launched process of modernization of the Czech military, and in connection with the
12
13
14
15
16
17
18
Statement of Government Policy of the Czech Republic, Praha, August 1998, http://www.mzv.cz/.
Resolution No. 125 of 17 February 1999 of the Government of the Czech Republic.
US Department of Commerce: The National Export Strategy. Trade Promotion Coordinating Committee Report, March
2000, page 11.
Based on statistical data of the harmonized system of the Czech Statistical Oce, http://dw.czso.cz/pls/stazo/stazo.stazo.
Ministry of Industry and Trade: List of Results of the Practical Application of Licensing Regime in the Area of Foreign Trade
with Military Material and Other Firearms, Ammunition and Explosives in 2003.
Czech Republic military expenditures according to the UN Register of Conventional Arms, http://disarmament2.un.org/cab/
milex.html and http://www.army.cz/avis/pdf/rozpocet.pdf.
Response to author's query from the Economic Department of the Ministry of Interior of 16 March 2004.
Introduction | 7
planned purchase of 240 wheel transporters (worth CZK 25 billion)19, and the loan of 14 Gripen supersonic aircrafts
(worth CZK 19.65 billion).20
Apart from the aforementioned areas of arms trade, the Czech Republic has witnessed a rapid boom in the sale of
small arms for sports, hunting and self-defence purposes in the 1990's. The growth has slowed down somewhat in
recent years. However, the volume of arms trade in this eld is nowhere near the trading in military arms and foreign
arms trade. Information concerning the precise gures in this eld of arms trade have not yet been published. We may
only estimate the scope of this from data concerning the number of registered small arms owned by the holders of gun
licences and arming licences. According to the data contained in the relevant government report, the Czech Republic
had 574,245 gun licence holders and 28,358 arming licence holders in 2002.21
In order to estimate the importance and scope of arms trade in the Czech Republic, we should take into consideration
the information on the number of commercial entities involved in the eld. In 2003, 99 companies have been involved
in foreign trade in military materials. The total number of companies authorized to trade in arms designated as military
material has dropped from 142 to 123 in the course of the year 2003.22 As of the end of 2003, 206 companies have
held the licence to sell civilian arms.
19
20
21
22
Resolution No. 1205 of the Government of the Czech Republic of 26 November 2003.
Resolution No. 596 of the Government of the Czech Republic of 9 June 2004.
For details about the accession of the Czech Republic to international negotiations about small arms, volume of production,
export, import and number of guns owned by holders of gun permits and gun licenses in the territory of the Czech Republic in
the year 2002, see website of the Czech Ministry of Foreign Aairs www.mzv.cz.
Ministry of Industry and Trade: TZ Statistical Overview of 19 March 2004 of the Export and Import of Military Material in
2003.
8 | Introduction
25
26
27
28
29
30
31
limited) public control. The same is true for supervision by more or less independent subjects. The legislators,
however, not only failed to justify the exclusion but also forgot to replace the abolished supervision mechanisms by
substitute control provisions. By doing so, they invalidated one of the most important anti-corruption tools in the
eld of the arms trading.
Even though the MoD has introduced some positive changes to its public procurement practice, especially in the eld
of internal control mechanisms partially structuring the public procurement process32 and introducing internal MoD
control mechanisms33 and provided wider access to information regarding both planned and implemented public
contracts on the web pages of the MoD34, such measures fail to replace independent control over the matter.
Secrecy of Contracts
In case of large public contracts to acquire armament for the Czech military, the authorities, in keeping with the Act
currently in force have often used provisions, which allow for limiting the procurement process to an invitation for bid
to a group of pre-selected bidders or solely to a single bidder. Such process, combined with the widely used provision
of the Commercial Code, which guides events of business secret35 and protection under the Act on Protection of
Secret Facts36, has led to suspicions of corruption and non-transparency of the public procurement process37.
32
33
34
35
36
37
38
Order of the Minister of Defence RMO No. 36/2001; MoD Economic section Expert command to implement decentralized
procurement, February 26, 2004.
MoD, Economic section, Acquisition policy oce.
http://www.army.cz/scripts/detail.php?id=170&PHPSESSID=18b7dd846f704a82b1f083e483a0a6dc.
17, Act No. 513/1991 Coll., Commercial Code, as amended.
3, Act No. 148/1998 Coll. of June 11, 1998, on Protection of Secret Facts and on amendment of selected other Acts as amended
by the Act No.164/1999 Coll., Act No.18/2000 Coll., Act No.29/2000 Coll., Act No.30/2000 Coll., Act No.363/2000 Coll.,
Act No.60/2001 Coll., nding of the Constitutional Court No. 322/2001 Coll., Act No.151/2002 Coll., Act No.310/2002 Coll.
and Act No.320/2002 Coll.
The Guardian has accused the British government for covering up for BAE bribes in the Czech republic, Radio Praha Ro 7, dated June
12, 2003; Aircrafts without a tender commission, Czech Television T1, dated: October 22, 2003; Military contracts under cross-re,
Stedn echy, dated: November 25, 2003.
Catherine Courtney: Corruption in the Ocial Arms Trade, Policy Research Paper 001, Transparency International UK, edited
by: Laurence Cockcroft and David Murray.
Public Procurement Policy | Corruption Risks Factors | 11
regarding osets is often disputable. Regardless of the risks, the Czech Government, in its decisions regarding the
largest strategic public procurements, viewed osets as an important part of the bids39.
Among other risks, which may lead to corruption, are unclear evaluation criteria that may even change in the course
of the procurement process. Such criteria may be used to inuence the key decision makers and to cover up for
potential corruption behaviour. Non-transparent evaluation criteria and suspicions of their changes in the course of
the procurement process have been present in the selection process for the supersonic aircrafts for the Czech military
(worth CZK 19.65 billion) and threaten to inuence the upcoming contract for wheel transporters (worth CZK 25
billion).40
39
40
41
42
43
44
The Army Wants Swedish Gripens, Hospodsk noviny on March 3, 2004; Gripen Negotiation Started by Experts, Prvo on December
23, 2003; Not To Compare Would Be Better , Euro on December 22, 2003; Any Advice Is Beyond Price, Euro on December 1, 2003;
Slowly It Flows But Fast It Burns, Euro on December 1, 2003.
ibid.
Government of the Czech Republic, Resolution No. 123 of 17 February 1999 to the Security Strategy of the Czech Republic.
Government of the Czech Republic, Resolution No. 297 of 9 June 1993, on the Negotiation of the Construction Concept of
the Army of the Czech Republic until the year 1996.
Ivan Gabal, Antonn Raek and working group: Politicians will decide about the future of the Army of the Czech Republic.
Prague, September 2003, page 2: As always, the Ministry of Defence and the Army of the Czech Republic have been left
to their own devices and unaided, without any assignments and unsupervised, without any obvious tasks and objectives. No
one questions the senior ocials of the Ministry about their goals, no one has to defend any long-term strategies in front of the
public, there is no control whatsoever concerning the due implementation of any intentions and plans. No responsibility has ever
derived from any of the unbelievably incompetent as well as extremely costly decisions in the area of armament acquisitions or
modernization programs
E. g. Tvrdk Miscalculated, Kostelka Must Economize, Hospodsk noviny, 1 August 2003.
54
55
56
57
58
59
60
Act. No. 130/2002 Coll. on State Support to Research and Development from the Public sources (Research & Development
Support Act).
Article 17, Section 6 of Act 130/2002 Coll.
Government Resolution No. 1167 of 19 November 2003.
Government Resolution No. 516 of 22 May 2002, Analysis of the Development and the State of the Research and Development
in the Czech Republic, Comparison with Foreign Countries, and a Proposal of the Preparation Procedure for the new National
Research and Development Policy of the Czech Republic for the Period from 2003 to 2008.
Government Resolution No. 516 of 22 May 2002, Analysis of the Development and the State of the Research and Development
in the Czech Republic, Comparison with Foreign Countries, and a Proposal of the Preparation Procedure for the new National
Research and Development Policy of the Czech Republic for the Period from 2003 to 2008.
Government Regulation 88/2001 Coll. of 31 January 2001 on terms and conditions for the targeted funding of research and
development and transfer of data to the central Files of projects nanced from the government budget.
See http://www.vyzkum.cz.
of project assignment and results, and information on the funds granted. However, the information on the results of
various projects (e.g. for the year 2003) commissioned by the MoD is insucient, since it does not allow to evaluate
the actual implementation of the declared research goals.
In November 2003, the government adopted a general document concerning the focus of future defence research &
development programmes in the context of professionalisation of the Czech military and the reform of Czech armed
forces. It also ordered the Ministry of Defence to invite tenders for the various programmes, and award contracts in
accordance with the Public Procurement Act.61
61
62
63
64
Resolution No. 1133 of 12 November 2003 of the Government of the Czech Republic on the programs of defence research and
development for the professionalisation of the Army of the Czech Republic and on the reform of the armed forces of the Czech
Republic.
Minutes of the press conference of 11 February 2004, after the government meeting at Oce of the Czech Republic
Government.
Act 218/2000 Coll. on budgetary rules and on the amendment of some related acts (Budgetary Rules).
Expenses Loom Large in the Budget, Prvo, 5 March 2004.
Industry and Handling of National Reserves | Corruption Risks Factors | 15
smaller quantity thereof. Commercial/economic departments of Czech embassies abroad and Czech government
representatives on visits abroad also support arms exports. There are no records, however, of funds spent for such
promotion (including the expenses of private company representatives travelling together with ocial delegations)
or the number of such activities, let alone the number of businessmen participating in such missions. Moreover, the
Ministry of Foreign Aairs refused to provide comprehensive information on the number of cases when Czech state
representatives lobbied in favour of Czech arms trading companies in meetings with their foreign partners.65
68
69
A response of the Department of Public Information of the Ministry of Foreign Aairs of CR of 6 April 2004 to author's query.
See http://cedr.mfcr.cz/.
Dierent types of state subsidies registered within CEDR III were paid to ALIACHEM, a. s., for instance (formerly SYNTHESIA
a. s., a well-known explosives manufacturer), amounting to the subsidies of CZK 113 425 132 from 1999 to 2002. Omnipol, a. s.
a company well-known for its trading with arms, received state subsidies of CZK 50 242 091 from 1999 to the end of 2002 to
compensate for the impact of arms embargos on the companys sales.
Response of ing. Hana Domnov, Dep. 381 of the Ministry of Finance of the CR, to the authors query of 24 March 2004.
Catherine Courtney: Corruption in the Ocial Arms Trade. Policy Research Paper 001, Transparency International UK, edited
by: Laurence Cockcroft and David Murray.
In the Czech Republic, for example, the former chief of the General Sta, lieutenant general Ji ediv, left the military
in 2002. The media report that less than a year later he launched Generals, s. r. o., a company specialised in commercial
consultancy to companies wishing to get military contracts.70 His company organised a tour for senior executives of a
US company General Dynamics to meet top military ocers and MoD ocials. General Dynamics were interested in
a contract for 243 armoured transporters, worth approximately CZK 25 billion. In relation to this contract, Generals,
s. r. o. employed two reserve brigadier generals, Karel Blahna and Ladislav Kozler. Another well-known example of
the involvement of former high-ranking military ocers in arms trading or manufacturing companies serves general
Ladislav Klma, former chief air force commander, who became, after his retirement from the military71, an employee
of the most important arms producing company in the Czech Republic, Aero Vodochody. At present, the so called
Revolving Door Syndrome is not guided by law. The issue was even not included in the act72 guiding the conditions for
obtaining retirement benets, severance payment and settlement for professional military members. The government
also failed to guide the issue in its Public Interest Protection Act, the Conict of Interests Act or any other mechanisms
which may protect the country from the Revolving Door Syndrome.
75
the volumes of the discarded surplus equipment. However, these gures do not fully correspond to the above data
regarding surplus military material reserves sold by the Czech military.
Main types of combat technology and armament of the Czech military76
Year
Tanks
Armoured vehicles
Combat aircrafts
Combat helicopters
1993
2135
2989
2262
294
37
1997
948
1367
767
120
36
2000
652
1211
648
97
34
Combat tanks
Combat aircrafts
Total
2002
81
52
13
146
2001
30
122
63
224
200078
75
83
199979
98
19
117
This paper does not try to explain the discrepancy between the above ocial data. On the contrary, the Ministry of
Defence should attempt to clarify the questionable or contradictory data. In 2003, the South Bohemian regional branch
of the non-governmental Society for Sustainable Development (STU) has requested from the MoD information
on the sales of redundant military material from the ministry reserve warehouses, including the names of commercial
entities the stock was sold to, and the possible export destination countries. However, the Ministry refused to provide
such information on the grounds of trade secrecy.80 The NGO's action led with the administrative court against the
76
77
78
79
80
Ministry's decision has not yet been heard.81 The Ministry thus prevents the public and the media from subjecting the
area of the disposal and sale of surplus reserves to greater public control. In spite of its seriousness, the issue of the
reselling of surplus arms reserves has not yet come into the attention of the parliamentary control bodies.
Apart from redundant armament, the Czech military also possesses extensive stock of at least 80,000 tons of redundant ammunition. It has already discarded part of this stock; however, frequent information of insucient liquidation
and loss records have appeared.82 The disposal of ammunition by the Czech military in the years 20002002 has even
been investigated by the Supreme Audit Oce (NK). However, the conclusions of this NK audit are classied
information, which is a highly unusual practice. According to a section of the classied report published by the media,
the audit oce has criticised the fact that the ammunition liquidation could have been commenced earlier and carried
out in greater scope.83 The Czech military intends to resell a part of this ammunition stock. However, the Ministry of
Defence has again concealed the exact scope of completed or planned redundant ammunition sales. In 2003, an initiative working group of deputies has been established to investigate the issue of redundant ammunition liquidation.84
However, the results of the group's work are unknown.
C. Arms Export
Corruption Abroad
International business relationships involve a high risk of corruption and for that reason, at least in the recent years,
have been in the centre of attention of both international and intergovernmental organisations. The Czech Republic
has joined a number of international initiatives and mechanisms to prevent corruption in this eld. In 2000, the Czech
Republic acceded to the OECD Convention on Combating Bribery of Foreign Public Ocials in International
Business Transactions; in 2002, the Criminal Law Convention on Corruption of the Council of Europe came into
force, followed by the Civil Law Convention on Corruption in 2004. The Czech Republic has also joined the GRECO
group (Group of States against Corruption), working under the Council of Europe. In 2003, the Council issued a
number of recommendations particularly for the Czech Republic, which were aimed at reducing corruption, such as
restriction of the parliamentary immunity of the Czech deputies against criminal prosecution.85 However, the Czech
Republic has not yet joined several important international mechanisms and it has not ratied the UN Convention
Against Transnational Organised Crime. One of the reasons for not ratifying is the non-existence in the Czech law of
the criminal liability of legal entities, which is required by the text of the Convention.86 The Czech Republic has also
not yet signed the UN Convention Against Corruption, adopted by the UN General Assembly in November 2003.
81
82
83
84
85
86
See http://www.zbrane.ecn.cz/cz/informace.html.
Finback Whale, T 1 Fakta, 29 September 2003.
When Soldiers Start Doing Business, Prot, 29 September 2003.
Author's interview with Deputies Mr. Jan Vidm and Mr. Antonn Sea.
Evaluation Report on the Czech Republic, Adopted by GRECO, Strasbourg, 28 March 2003, http://www.greco.coe.int.
The proposal for the amendment of legal regulations that would allow for the introduction of criminal responsibility of legal
entities was discussed by the Legislative Council of the Government during the preparation of this study.
Arms Export | Corruption Risks Factors | 19
87
88
89
90
Czech Ocial Talks about the Investigation of Illegal Dealings of Czech Companies Trading with Weapons, Prvo (website version),
9 November 2001, source: David Isenberg's Weapons Trade Observer.
Czechs have the Arms Export under Control, TK, 9 November 2001, source: David Isenberg's Weapons Trade Observer.
Response to the author's query of 22 May 2003, on the issue of the control of export and import of military weapons and
equipment, civilian weapons and merchandise and double-use technologies, as described in the National Action Plan for
Combating Terrorism, Ministry of Interior of the CR, 27 May 2003.
Weapons for Congo, T1 Kleknice, 15 July 2003.
As part of the anti-terrorist measures adopted in 2003, the government ordered the Ministries of Industry and Trade,
Interior, and Defence to submit their evaluations of the functioning of the existing foreign trade of military material
control regime.91 In July 2003, it adopted a series of measures proposed by the nal document.92 It decided to include
supervisory board members in companies applying for a foreign trade permit for military materials in the group of
physical persons subject to security audits. The government also extended the deadlines within which the Ministries
have to issue their opinion on the licence application. Moreover, it requires the Ministry of Industry and Trade to
immediately notify the Ministry of Interior of all licence applications received, and allows the Ministry of Interior to
refuse an application should the export concerned threaten national security interests. It also requires the Ministry of
Industry and Trade to establish, following the accession of the Czech Republic to the EU, an information exchange
between the Ministry and the EU bodies concerning denials (denied export licences).
Apart from the measures adopted by the government, the Ministry of Foreign Aairs revised their existing licence
procedures in the second half of 2003.93 The Ministry established a unique database of export licence applications, the
record of its decisions concerning these applications, and a database of licence applicants. It also organised a training
of Ministry ocials concerning the rules of the European Code of Conduct on Arms Exports, and held a workshop
for the ocials of other ministries on this topic.
All of the above measures represent a step in the right direction, strengthening the internal control mechanisms of
the authorities involved, standardising the decision-making process and extending the scope of information-sharing
between the ministries throughout the licensing procedure, which has been somewhat problematic so far. They also
support systematic decision-making during licensing procedures and cross-control between various public authorities.
However, in spite of all of these measures, certain gaps remain.
The Czech authorities have long been considering the establishment of a central registry of all administrative sanctions,
recording the oences of companies and individuals against the administrative law. At the beginning of 2004, the
government accepted the Ministry of Interior's proposal of the Analysis of Options for Establishing a Registry of
Certain Administrative Sanctions.94 The analysis identies the creation of such register as the key step among anticorruption measures. The government then issued a decree ordering the Ministry of Justice to submit a proposal for
the registry of selected oences by 30 June 2004. However, it is not clear when such a registry will be established,
or even if it should be established. At present, there is no source of information concerning arms trade that would
provide the relevant records of past oences of the entities involved, thus enabling the bodies involved in the licence
procedure, export supervision (Customs Service of the Ministry of Finance), or procurement procedure to obtain
important information to prevent possible unfair conduct or repeated oences of such entities. Within the existing
licence procedure, similar databases are maintained by various authorities (Ministry of Industry and Trade Licensing
91
92
93
94
Resolution No. 227/V of 3 March 2003 of the Government of the Czech Republic.
Resolution No. 685 of 9 July 2003 of the Government of the Czech Republic.
Oral response of the Deputy Minister of Foreign Aairs for Security Policy JUDr. Jan Winkler at a meeting of 18 November
2003.
Government Resolution No. 78 of 21 January 2004.
Arms Export | Corruption Risks Factors | 21
Administration, Ministry of Foreign Aairs, Customs Service of the Ministry of Finance), but they are not shared. This
prevents both proper control and systemisation of the public authorities' decision-making process.
A number of arms export permits granted recently casts doubts on whether the authorities involved in the licensing
procedure base their decisions on clearly dened rules. As early as 1998, the Czech Republic declared adhesion to
the European Code of Conduct on Arms Exports. It also declared observation of the EU and UN embargos. In spite
of that, the Czech authorities permitted the export of 16 RM-70 rocket launchers and 41 T-55AM-2 tanks to Sri
Lanka between 2000 and 2001. In 2001, they also permitted the export of an unspecied number of machine guns
into the country. Shortly prior to the imposition of EU sanctions against Zimbabwe in 2000, The Czech Republic
had exported six RM-70 rocket launchers, 1,000 RPG 7 anti-tank weapons, and an unspecied number of ries and
automatic weapons. In 1999, the Czech Republic exported twelve Albatros subsonic into Yemen, followed by dozens
of T-55AM-2 tanks between 2000 and 2001.95 Apart from these, large volumes (exceeding hundreds of thousands)
of small sport and hunting arms have own from out of the Czech Republic to Yemen. The above exports have
constituted a violation of the European Code of Conduct on Arms Exports, and a violation of the ocially-declared
Czech policy.
The most recent incident expensively discussed in the media and raising questions concerning the authorities'
impartiality and adherence to clearly dened rules in licensing procedures, was the attempt to export Vera passive
radar systems into the People's Republic of China. Omnipol, the Czech arm export company, obtained a permit to
export the systems into this destination in the middle of January 2004, despite the fact that the EU has imposed an
arms export embargo on China. The Czech government has nally decided on 20 May that the respective Ministry
should withdraw the export permit granted for foreign policy reasons.96 Deputy Foreign Minister Jan Winkler
stated on TV that the Ministry of Foreign Aairs had raised objections against the export even during the licensing
procedure, but that they agreed to a compromise in certain cases.97 However, the Ministry has not explained the
reason for making such compromises. The Respekt weekly voiced suspicions of Miroslav Kalousek, leader of KDUSL (Christian Demokratic Party which is part of coalition government) and a friend of Omnipol boss Richard Hva,
intervening in the licensing procedure in favour of the export company.98
None of the measures adopted to date, not even the government amendment of the Act on Trading in Military
Materials, currently discussed by the Senate99, attempt to reduce the risks of illegal exports concerning re-export to
other countries by establishing a procedure of performing audit of the end user stated in the export permit application
95
96
97
98
99
According to the report Arms production, exports and decision-making in Central and Eastern Europe, Saferworld, July
2002, http://www.saferworld.co.uk.
Government Stops Radar Sales to China, Hospodsk noviny, 21 May 2004.
Czech Arms Export, T1 - Udlosti, komente, 14 May 2004.
Vera Waits for a Visa, Respekt, 17 May 2004.
House Print No. 573/0 of 29 January 2004, Government Bill amending Act No. 38/1994 Coll., on foreign trade with military
material and amending Act 455/1991 Coll., on trade licensing (Trade Act), as amended and Act 140/1961 Coll., the Criminal
Code, as amended, amended by Act 310/2002 Coll.
after a certain time period, and the imposition of automatic sanctions on both the exporter and the customer for
violations of permit conditions.
102
103
104
105
Cf. Petr Neas's opinion in: Czech Weapons for Al Queda, Respekt, 14 July 2003.
Oral information by the chairman of the Committee for Defence and Security of the Chamber of Deputies of the Parliament of
the Czech Republic Mr. Jan Vidm during meeting of 25 February 2004.
The annual statistical reports were restructured in 1997 to include the data about state interventions against organized crime.
Based on the Arms production, exports and decision-making in Central and Eastern Europe report, Saferworld, June 2002,
http://www.saferworld.co.uk.
Act No. 148/1998 Coll. on protection of classied information and amendment of some acts, as amended by Act 164/1999
Coll., Act 18/2000 Coll., Act 29/2000 Coll., Act 30/2000 Coll., Act 363/2000 Coll., Act 60/2001 Coll. Act, judgment of the
Constitutional Court published as 322/2001 Coll., Act 151/2002 Coll., Act 310/2002 Coll. and Act 320/2002 Coll.
Annex 8 to Government Regulation No. 246/1998 Coll., List of Classied Data within the sphere of the Ministry of Industry
and Trade.
Arms Export | Corruption Risks Factors | 23
concerning negotiations on cooperation in the eld of foreign trade in military materials and other types of sensitive
goods, as long as concealment of such information reects the agreement or interests of the parties involved, and the
lists of individual permits issued, as well as comprehensive statistical or other data concerning the executed exports
and imports of military material, should it be possible to use such data to identify: the products concerned, the volume
and value thereof and the country of supplier or customer, when the transaction involves important military material
or other military material. However, the Ministry of Industry and Trade publishes a press release containing general
statistical data and trends in arms export for the relevant year.106 In 2004, the Ministry of Industry and Trade published
a list of companies holding foreign trade licences for military material on its website.107
In January 2003, the STU, a non-governmental organisation, requested the list of licences granted, the list of licences
rejected, and the list of permits issued by the Ministry of Industry and Trade for the export and import of military
material for the year 2002.108 The NGO also requested copies of the opinions of the Czech Ministry of Foreign
Aairs on the applications of legal entities for the permit for foreign trade in military material.109 Both these requests
had been denied by the Ministries. In the rst case, the Ministry referred to the Act on the Protection of Classied
Information and the government decree dening classied information; to sensitive trade information and the Personal
Data Protection Act. In May 2003, the NGO challenged both these decisions in an administrative proceeding led
with the Municipal Court in Prague. The court has not yet issued a decision in the case.
Since 2000, the transparency of the arms trade in the Czech Republic has greatly improved due to publication of
annual report on the export and import of small arms.110 This and other reports in the subsequent years have been
drafted by the interdepartmental working group for small arms, and issued by the Ministry of Foreign Aairs. The
reports analyse the approach of the Czech Republic toward international negotiations concerning small arms owned
by rearm licence holders in the Czech Republic. However, they fail to report data on the number of small arms
owned by the Czech Army. Similar limitations apply to the information on the production, permitted exports and
permit denials. Moreover, the last report published111 has failed to provide information on export destinations of small
arms from the Czech Republic, even though it had been contained in all previous reports. However, in response to
the objections raised by NGO groups associated in the Working Group on Arms Trade Control, Deputy Foreign
106
107
108
109
110
111
See for example the Ministry of Industry and Trade of the CR: TZ Statistical Overview of the Export and Import of Military
Material in 2003, 19 March 2004.
Ministry of Industry and Trade, Holders of Licence to Conduct Foreign Trade with Military Material, http://www.mpo.cz.
Request for information by Association for Sustainable Development, South Bohemian regional branch, to Ministry of Foreign
Aairs of 20 January 2003.
Request for information by Association for Sustainable Development, South Bohemian regional branch, to Ministry of Industry
and Trade of 20 January 2003.
Information about the accession of the Czech Republic to international negotiations concerning small arms, export, import and
number of gun permits and gun licenses in the territory of the Czech Republic in the year 2000.
Information about the accession of the Czech Republic to international negotiations concerning small arms, export, import and
number of gun permits and gun licenses in the territory of the Czech Republic in the year 2002.
Minister Jan Winkler promised that the missing information would be included in the 2003 report.112 Furthermore, in
several interviews for the media113 the Deputy Minister promised the NGOs that the newly published annual report
would include information on all types of arms exported, the export destinations, and possibly even the nancial value
of the individual transactions. He also conrmed that the Czech Republic was prepared to share the information on
arms export permit denials with other EU countries. However, no details concerning the contents of the forthcoming
annual government report have been made known to the date of drafting this paper.
112
113
Response of the Deputy Minister of Foreign Aairs of the Czech Republic Mr. JUDr. Jan Winkler of 30 September 2003 to
the open letter of the Working Group on Arms Trade Control.
E. g. Control of Arms Exports, T1 Udlosti, 9 October 2003.
Arms Export | Corruption Risks Factors | 25
As indicated by this paper, should the Czech government truly wish to succeed in combating corruption in the eld
of the arms trade, it needs to implement a number of changes to limit the corruption behaviour. The most needed and
most important measures are the following:
:: Amendment of the Public Procurement Act
An amendment should limit the number of exemptions from the force of the Act, including the arms trade; to restrict
the contracting authorities' free choice of the type of the selection process; to simplify the process of proposing
reviews of the contracting authority's actions; to introduce a system allowing for a review by a supervisory body
of bid evaluations performed by evaluation committees; and to introduce active remedies and sanctions for the
violation of provisions of the Act.
:: Improved Transparency and Simplication of the Selection Process
Contracts and evaluation criteria should remain unchanged throughout the entire selection process, which should
always be open and simple to the maximum extent. Bid evaluations should not take into consideration oset
proposals.
:: Public access to Information on Public Subsidies of Research, Development and Sale of Arms
The central registry of subsidies should be extended to include information on all types of government subsidies.
:: Transparent Conditions for Allocating Government Subsidies
The government should favour neither indirect support nor classied support over the public or parliamentary
control. Should the government provide its subsidies via awarding needless contracts, the key ocials involved
shall bear full personal, political, or criminal responsibility.
:: Introducing Preliminary and Follow-Up Parliamentary Arms Trade Control
The MPs should receive regular information on the government policy in the eld of arms trade and should have
the possibility to comment on such policy.
:: Publishing Regular Detailed Reports on the Arms Trade for the Use of the General Public
26 | Conclusions and Recommendations